French Fume as Macron Bypasses Parliament to Pass Pension Reform

Major protests erupted in France again last week when French President Emmanuel Macron used executive branch constitutional powers to bypass parliament and push through a controversial pension reform that increases the retirement age by two years to 64.

The government faces two no-confidence votes on Monday afternoon in France as a result of the move, which came just before the pension reform plan was to be voted on by the National Assembly, France’s lower house of Parliament. Instead, Prime Minister Élisabeth Borne announced the government would invoke Article 49.3 of France’s constitution.

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Article 49.3 gives the executive branch the power to force a bill through the National Assembly without a vote. While the French Senate had already approved the measure, it had become apparent after weeks of debate that it would not pass the lower house, which spurred Macron to make the controversial decision.

When Article 49.3 is triggered, the opposition parties by law are given 24 hours to file a no-confidence motion against the government signed by at least 10% of the members; both the far-right National Rally and a coalition of other opposition parties filed motions on Friday. If the no-confidence motions are rejected, the bill is passed. But if either motion of no confidence is supported by a majority of members, the bill is rejected, Borne must resign and Macron could either appoint a new prime minister or dissolve parliament and hold fresh elections. This, however, is extremely rare: It has only happened once, back in 1962.

In January, Macron announced plans to reform the French pension system, which included raising the retirement age for French workers to 64 from 62. The announcement angered many French and led to widespread protests.

All French retirees currently receive a state pension that averages approximately €1,400 ($1,490) per month, which is funded by contributions from current workers. The French government says the reform is needed because the system is being jeopardized by an aging population that has resulted in an increasing number of retirees supported by a decreasing number of contributors.

Under the French government’s plan, the retirement age will be raised by three months per year, starting in September 2023, until it reaches the target age of 64 in 2030. The reforms also mean that, beginning in 2027, it will be necessary to have worked 43 years to receive a full pension; in past reforms, that requirement would not phase in until 2035.

According to the Organization for Economic Cooperation and Development, France has one of the lowest retirement ages in the industrialized world and spends nearly 14% of its economic output on pensions, which is more than most countries.

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Tags: Article 49.3, Elisabeth Borne, Emmanuel Macron, France, National Assembly, no confidence vote, Parliament, Pension Reform, Protests, Retirement Age

Activist investors often don’t do well because they tend to misunderstand how their targets work, according to a study in the Yale Law Journal.

It found that “activists have a higher risk of mistargeting—mistakenly shaking things up at firms that only appear to be under-performing.”

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The activists do not see the whole picture about their target companies, as they are focused on the short term and thus make a lot of mistakes with negative consequences, in the estimation of the law journal entry’s authors, Zohar Goshen, a Columbia Law School professor, and Reilly S. Steel, a lawyer who is pursuing a political science doctorate at Princeton University.

The telling statistic: The Bloomberg Activist Hedge Fund index returned 132% from inception in 2013 to the end of 2022. The S&P 500 did better during the period, up 145%. Ongoing statistical evidence for how often activists get what they want is harder to come by, and the Yale report did not offer that. One study, published by Harvard Law School in 2020, stated that in 2017, activists had a 34% success rate.

The Yale study gave several examples of activist mistargeting, including Bill Ackman’s failed attempt to revamp perennially ailing department store chain J.C. Penney. The hedge fund chief installed a CEO who did away with discounts and clearance sales, promising “everyday low pricing.” Customers did not cotton to this approach, and revenue dropped. Ackman’s firm Pershing Square admitted defeat and sold its stake at a loss in 2013.

J.C. Penney has continued to have a rough time, including a bankruptcy filing and many store closings, and since 2020 has been owned by mall landlords Simon Property Group and Brookfield Asset Management. Although the owners do not report the much-shrunken retailer’s performance, analysts say it appears to be making some headway.

Other illustrations the report cited included when Carl Icahn pushed Netflix to sell itself, but the company resisted—and has flourished since. Another was Dan Loeb’s Third Point, which tried to make Sony break itself up by separating its electronics and entertainment. Same sorry result.

Of course, there are numerous examples of activists’ success that the report did not cite. Consider hedge firm Engine No. 1, which won a proxy fight to seat three environmental-minded directors on ExxonMobil’s board. The hedge fund did so by enlisting large pension programs—notably the California Public Employees’ Retirement System, the California State Teachers’ Retirement System and the New York State Common Retirement Fund—and others, such as Vanguard Group, to win the contest. Since then, the energy giant has committed itself to efforts to reduce greenhouse gas emissions.

In 2006, Trian Partners forced fast-food chain Wendy’s to spin off its Tim Hortons donut unit. Trian argues now that the spin-off permitted Wendy’s to focus more on its core operations and on competing with rivals like Burger King and McDonald’s.